My Say: The merits and demerits of meritocracy

Five years ago, after the 13th general election, Dr Nungsari Radhi — who was then the director of Khazanah Research and Investment Strategy — and I co-wrote an article in this weekly entitled “On Moving Forward”. Among the things we wrote was this: “We hope for a Malaysia where a low-income rubber tapper’s child in Segamat can fight for and achieve the same successes as a high-income lawyer’s child in Bangsar.”

For the purposes of this article, let’s call the rubber tapper’s child A and the high-income lawyer’s child B. If we take a straw poll and ask, “What would be the best way for A and B to fight for and achieve the same successes?” the answer, for most, would likely be “education” in one form or another. There is a belief that education is society’s great equaliser, enabling mobility for even the most disadvantaged in society.

That belief is wrong. Education is not society’s great equaliser.

Or maybe I should put it another way — education can be society’s great equaliser, but not in the way that society is today. The reason for this is as follows. The philosophy behind education as a great equaliser is that it is meant to provide a basis for meritocracy regardless of background.

But here’s the problem. Meritocracy, in its current state, worsens inequality over time.

To be clear, there are many benefits to meritocracy. For one, it is a better system than nepotism, cronyism or other such forms of resource allocation. Second, it also at least ensures that the resources are held or allocated to those who can properly make use of them. That said, I would argue that meritocracy is a system that only works particularly well for limited scenarios.

Meritocracy works well if you need to deliver an objective, as best as possible, over a single period of time or generation. Think of World Cup squads — the French players who were selected for the French World Cup squad were likely selected on pure merit — or a CEO to deliver outstanding performance for a given company over the three or six years (or 14) of his contract.

Where meritocracy tends to break down, and therefore perpetuate inequality, is when it persists over multiple generations. In a wonderful article entitled, “The Birth of the New American Aristocracy”, American philosopher Matthew Stewart argues that the new aristocracy isn’t quite the top 0.1% of society — the truly elite — but the top 9.9%, the ones who have benefited quite a lot from globalisation and, yes, meritocracy over the past few decades. Indeed, it is this group — the higher-income earners in developed societies — that have benefited, as per Branko Milanovic’s wonderful elephant chart, rather than the middle 50%, who have been hollowed out over the past few decades.

But who is this 9.9%? Stewart writes, “We are mostly not like those flamboyant political manipulators from the 0.1%. We’re a well-behaved, flannel-suited crowd of lawyers, doctors, dentists, mid-level investment bankers, MBAs with opaque job titles, and assorted other professionals — the kind of people you might invite to dinner. In fact, we’re so self-effacing, we deny our own existence. We keep insisting that we’re ‘middle class’.”

In fairness, that is all well and good. What is wrong with a society that shows people with professional, highly-qualified, highly-meritocratic jobs having strong income growth? Furthermore, it has expanded to knock away racial and gender stereotypes — the top 9.9% is pretty inclusive, at least in the US and, I suspect, in Malaysia as well in terms of gender and ethnicity. So what’s the problem?

The problem with meritocracy as a determinant for resource allocation is not evident over one generation. In fact, as mentioned, meritocracy is great for allocating resources over a single generation. However, over time, as Stewart argues, “Our new multiracial, gender-neutral meritocracy has figured out a way to make itself hereditary.”

This is pretty intuitive, isn’t it? Let’s again consider Student A —the rubber tapper’s child from Segamat — and Student B — the high-income lawyer’s child from Bangsar. Suppose both A and B had the same quality of teachers and schools which — as you can imagine — is already a stretch, but let’s go with it. But even then, who is more likely to achieve better academic results overall? Who is more likely to go abroad and expand his or her horizons and world views? Who is more likely to spend school afternoons at dance, violin or tennis lessons as opposed to helping out at the parents’ workplace? Who is more likely to get better internships and jobs?

Realistically, the answer is Student B. This is because one of the biggest, if not the biggest, determinants of student outcomes is parental income. The social science research is pretty clear on this. Future earnings, school grades and even IQ levels are strongly correlated with parental income. Now, suppose the parents were in the 9.9%, not the elite corporate tycoons of the world, but just investment bankers, lawyers, economists, doctors and so on — in short, parents who achieved their jobs through meritocracy. This correlation would still hold and their children would therefore be exposed to a far different life than the children of those who weren’t in the 9.9%.

And the difference is not just money. As Stewart writes, “Money may be the measure of wealth, but it is far from the only form of it. Family, friends, social networks, personal health, culture, education and even location are all ways of being rich too. These non-financial forms of wealth, as it turns out, aren’t simply perks of membership in our aristocracy. They define us.”

So, if meritocracy is how we continue to allocate resources in the future, and if there is a strong correlation between parental income and children outcomes, and if the new “aristocracy” brings benefits beyond wealth, it stands to reason that meritocracy will inevitably increase inequality over generations.

Karl Marx was absolutely right when he said, “The history of all hitherto existing society is the history of class struggles.” The different “classes” could be masqueraded by ethnicity, religion, property ownership, and so on, but class still matters. The only difference is, the new class is meritocracy.

To be clear, I am not advocating for an end to meritocracy. It is useful, optimal even, in certain circumstances. Neither do I believe that the socialist solution of equality of outcomes for all is the way to go — that has proven to be a disaster when it has been tried and it will certainly dampen innovation and growth.

My view is that we require meritocracy, but with strong affirmative action. Our opportunities in life should not be determined by the birth lottery and redistributing that luck of the birth lottery is critical. At the same time, we need to ensure that resources are also given to those who can properly use them. Meritocracy still matters.

I will dive into this solution of meritocracy plus strong affirmative action in my next article. In the meantime, I would go back to my earlier statement that education is not the great equaliser of society.

How can it be when the correlation of student outcomes is strongest with parental income and not educational attainment? We must rethink our principles of social mobility by pure meritocracy to build a more inclusive society over generations.

Nicholas Khaw is an economist with the Khazanah Research and Investment Strategy division